Bumi Says $500 Million Deal for Bakrie Exit Nears Completion

July 10 (Bloomberg) -- Bumi Plc, the Indonesian coal
producer at the center of an ownership dispute, is close to
completing a deal valued at more than $500 million to sever its
ties with co-founders the Bakrie Group after relations soured.

Bumi, noting recent press reports, said it’s near an accord
to sell 29.2 percent of PT Bumi Resources to one of Indonesia’s
wealthiest families as part of a nine-month-old plan to unwind
an investment. At the same time, a group controlled by Bumi
Chairman Samin Tan is in talks with the Bakries to buy their
23.8 percent of London-listed Bumi, it said in a statement.

A deal would mark the end of an almost two-year affiliation
with the Bakries, a family-owned palm oil-to-property empire
founded in Sumatra in 1942. They co-founded the company in a $3
billion venture with Nathaniel Rothschild which started to sour
last year amid board infighting, a slump in coal prices and
financial probes in the U.K. and Indonesia, the biggest exporter
of power station coal.

Bumi and the Bakries first announced a proposal to sever
ties in October. Talks continue and the “economic terms remain
consistent” with the original plan with the Bakries paying more
than $500 million in cash, Bumi said today.

Rothschild Responds

Rothschild, who owns about 15 percent of the company, said
he won’t support the proposal to separate the group from the
Bakries. In e-mailed comments to Bloomberg News he claims Bumi
Chief Executive Officer Nick von Schirnding has misled investors
into believing the terms of the October proposal were fixed.

“We were led to believe by the board that the original
proposal was fixed in stone and in reality we’ve been led up the
garden path one more time and this time the minority investors
can block it, should block it and demand a transaction that we
thought was fixed,” Rothschild said in a phone interview.

Bumi has been at the heart of a battle for control between
Rothschild, scion of a centuries-old British banking dynasty,
and the Bakries with both making rival proposals to unwind the
deal. Bumi, which slumped 69 percent in London last year, has
been suspended from London trading since April. Selling its
stake in PT Bumi would leave the company with an 85 percent
holding in PT Berau Coal Energy, Indonesia’s fifth-largest
exporter of energy coal.

Two-stage Plan

As part of a two-stage plan, the Bakries are in talks with
Tan, Bumi’s chairman, to sell him their entire 23.8 percent
holding in London-listed Bumi, people familiar with the plan
told Bloomberg this week. That would double his holding to 47.6
percent.

Tan’s PT Borneo Lumbung Energi & Metal has made a cash
offer and talks are continuing, the Bakrie Group said today in
an e-mailed statement. “A total cash alternative adds weight to
the unwinding process, and we hope minority shareholders will
share this view,” the group said in the statement. The offer is
value accretive to Bumi and shareholders, it said.

The Bakries would use the funds from the sale to buy their
holding in Bumi Resources, Indonesia’s largest coal exporter,
which they sold to Bumi Plc in 2011, for $508 million, the
people said. Bumi is considering returning the funds to its
shareholders as a special dividend, one of the people said.

Rothschild today proposed that the Bakrie’s stake be
offered to existing shareholders rather than sold to Tan who
could then underwrite the offer and be free to buy any stock not
taken up, Rothschild’s NR Investments Ltd. said in a statement.
The revised separation proposal deprives investors of upside
“just when thermal coal fundamentals are starting to improve,”
according to the statement.

Bumi today said it has been made aware of talks between the
Bakries and PT Borneo affiliate Lumbung Energi & Metal about
Borneo buying the Bakries’ Bumi stake. Such a deal would be
conditional on Bumi selling its Bumi Resources stake to the
Bakries, it said.

A condition of a purchase by Borneo of the Bakries’ stake
in Bumi is that the London-based company’s independent
shareholders waive the requirement for Borneo Lumbung to make a
general offer, Bumi said.

Bumi directors affiliated with Borneo Lumbung have recused
themselves from the process, and the separation transactions are
being studied by an independent committee of the board, it said.